be in talks to acquireWhen Emergence started, it had less competition in the work software and infrastructure market. But with more money flowing into VC, especially in the cloud, the firm has increased its fund sizes by about 30% each fund to be able to build comparable ownership positions in startups. The opportunity fund, similarly, is recognition that the firm needed a dedicated war chest to draw upon to keep backing its winners in outsized later private rounds.
But Emergence hasn’t abandoned another rule that has kept the firm from keeping pace with some of its peers on another key area: the diversity of its partnership. All five general partners in the new funds are male. With a rule that the firm won’t hire at the partner level, but instead builds up investors over time, Emergence didn’t give itself an option to fix that with the new funds.
Limited partners in funds like Emergence’s — which has the likes of the Carnegie Foundation and Yale University behind it — are asking more about diversity in the partnerships they back, Spain freely admits. It’s something he says is a priority for Emergence, even though it won’t bend from its own tradition. “Lotti is poised to be someone to join those ranks in the next few years,” Spain says.
As for the types of startups that Emergence plans to back with its new fund: the partnership has no plans to stray from enterprise, where it has core theses in what it calls “coaching networks,” the “deskless workforce,” “deep collaboration and “industry cloud.” About half the firm’s investments, however, might fall in other buckets of enterprise, according to Spain, as partners get excited about a new theme.
“We do pay attention to metrics,” Spain says. “But frankly, the thing that gets us most excited about a company is when we talk to customers, and those customers are raving fans of what a company is doing. They can’t imagine their life without this product. We’ve seen an incredibly strong correlation over time between companies that have that, even pre-revenue, and companies that go on to be the most successful in their space.
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